In the interests of seeking the best product or service at the best price, businesses and government bodies may sometimes invite several other businesses to submit a proposal or offer, outlining what they can provide, within what timeframe and for what price. This is known as a tender process.
Businesses that attempt to interfere with competitive tender processes may be breaking the law. When competitors make agreements about the terms on which they will tender for the right to supply goods or services, they threaten the competitive outcomes that such tenders are designed to create. For this reason, bid rigging, also referred to as collusive tendering, is prohibited. Competing businesses cannot reach an agreement to:
- not tender for a particular project, whilst agreeing for one or more particular parties to tender
- tender on the basis that one bid is more likely to be successful than the others
- initially bid but later withdraw their bids
- tender, but a material component of at least one of the tenders is worked out in accordance with the contract, arrangement or understanding between the parties
- take turns winning business.
For about 10 years until 1997 most of the companies in the fire alarm and fire sprinkler installation industry in Brisbane held regular meetings at which they agreed to allow certain tenders to be won by particular competitors. To ensure that the tenders were won by the agreed participants, the companies agreed on the prices at which they would tender for particular projects. It has been estimated that this conduct affected contracts worth more than $500 million. The Federal Court imposed more than $14 million in penalties on the companies and some of their executives.